Exchange Rate Volatility and FDI Inflows : Evidence from Cross-Country Panel Data
Using a panel of 80 developing and developed countries for the period 1990-2015, this studyanalyses the relationship between exchange rate volatility and foreign direct investment (FDI)inflows. The results reveal a negative relationship between de...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2018
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/534841528724321585/Exchange-rate-volatility-and-FDI-inflows-evidence-from-cross-country-panel-data http://hdl.handle.net/10986/29911 |
| Summary: | Using a panel of 80 developing and
developed countries for the period 1990-2015, this
studyanalyses the relationship between exchange rate
volatility and foreign direct investment (FDI)inflows. The
results reveal a negative relationship between de facto
exchange rate volatility andFDI. Reducing exchange rate
volatility by 10 percent over one-year can boost FDI
inflows—ceterisparibus—by an estimated 0.48 percentage
points of GDP while the same reduction over the pastfive
years can boost FDI inflows by 0.27 percentage points over
the long-run. The results areapplied to the case of South
Africa, which has been experiencing high volatility of the
rand inrecent years. Reducing the rand's volatility to
that of developing country peers, South Africa could boost
FDI inflows by a potential of 0.25 percentage points of GDP. |
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